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Can digital revive the Belgian Economy?
Filiep Deforche
Senior Partner and Managing Director @ BCG
Trends Summer University, June 10, 2016
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 2
Can digital revive the Belgian economy?
a new world
1
the opportunity
the call for action
2
3
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 3
We live in an exponential world
700
79
100
1,000,000
10,000
100
10
1,000
100,000
log (price) ($)
2014 2009
Year
2015
22,000
2013 2008
500,000
2007
40,000
100,000
20,000
3D Printing Drones Industrial Robots Sensors (3D Lidar)
a new world
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 4
Digital has many facets
Technology
IoT Cloud Mobile
Social
Analytics 3D printing
AI/ Robots
Augmented
reality
New customer
habits
Multitasking Speed
Simplicity
Safety Pro-sumers Sharing
economy
Personalization
New business
models
Rental
economy Ecosystem Subscription
Freemium On demand Market places
New ways
of working
Exponential
organization
Agile
Customer
centricity
Lean
start up
Open
innovation
Data
Sharing Communication Availability
Consumption
Analytics Collection
Generation
Visualisaton
a new world
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 5
E-commerce
Industry 4.0
Services 4.0
(Fintech)
Sharing economy
through digital
platforms
Digital DIY
Digital is reshaping the economy
a new world
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 6
E-commerce in Belgium lagging …
5
15
20
10
25
0
4%
9% 9%
6%
4% 5%
13% 13% 13%
2014 share of online retail market in country retail market (%)
23%
9%
11% 12%
14%
16%
13%
a new world A
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 7
0
5
10
15
20
25
30
35
12.1
5.0
11.5
2.7
Government
spending
€ Bn (2014)
Exports Imports Internet
economy
Investment
18.6
10.4
Consumption
... leading to an average digital economy
17% 9% CAGR '10-'14
€6.7 Bn
e-commerce1
1. Includes €2.3Bn import and €4.4 Bn Belgian e-commerce reflecting 34% cross-border e-commerce. Note: export/imports include e-commerce and internet share of IT goods and services import and export; E-commerce includes M-commerce Source: EIU, Eurostat, WorldBank, Gartner, Ovum, annual reports, BeCommerce, Ecommerce Europe, UN Comtrade, WTO, BCG analysis
5.2% of GDP
1%
a new world
-1% 9% 9%
A
Ireland 22.8%
UK 8.4%
Finland 8.2%
Sweden 8.2%
Denmark 7.6%
Netherlands 6.8%
Germany 5.1%
France 5.0 %
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 8
Key industrial innovations fuel digital economy
Industry
4.0
Advanced Robots
• Robots with integrated sensors
• Standardized interfaces
Simulation
• Simulation and optimization of value networks
• Test and optimize machine settings
Horizontal/Vertical Integration
• Cross-company data integration
• Fully automated value chain
Industrial Internet
• Network of machines and products
• Network objects communication
Augmented Reality
• Maintenance and logistics
• Information display
Big Data and Analytics
• Comprehensive evaluation of data
• Real-time decision-making
Additive Manufacturing
• Spare parts and prototyping
• Decentralized to reduce transport
Cloud and Cyber-security
• Managing data in open systems
• Network security of linked machines
a new world B
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 9
Belgian productivity increase lagging Eur average
5
0
6
7
3
4
2
-1
-3
-2
1
Increase in GDP per hour worked between 2010 and 2014
-2.8%
0.3% 0.4% 0.6% 0.6% 0.7%
1.0%
1.7% 2.2%
2.6% 2.8% 3.1% 3.1%
3.6%
5.8%
6.6%
Source: OECD
a new world B
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 10
Investments Insurance Enablers Data and
analytics
Payments Financing Security Cash
management
Emergence of strong BE Fintech player landscape
Source: Quid, Crunchbase, Belgium Fintech Group, Sway.com, BCG research
a new world
FinTech Ecosystem
C
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 11
... thanks to strong VC funding
0,020,020,02
0,050,06
0,090,09
0,12
0,00
0,05
0,10
0,15
Relative importance on GDP of VC investments in top 10 countries (%)
PL DE FR NL BE UK IR SE
Note: top 10 countries in Europe considered, Russia and Cyprus excluded. Funding over period 2000 to 2015 Source: Eurostat, Quid, BCG DV, BCG analysis
a new world C
~€ 300M received
VC funding '00-'15
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 12
Can digital revive the Belgian economy?
a new world
1
the opportunity
the call for action
2
3
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 13
BCG assessment: Internet economy € 37Bn by '20
Belgian Internet Economy at
5.2% of GDP in 2014...
Investment 5.0
Consumption
Internet
Economy 18.6
Imports 11.5
10.4
2.7 Government
Spending
Exports
12.1
5.2% % of GDP
Euro Bn
Note: All growth rates are nominal. i.e. including inflation. Source: EIU, Euromonitor, Eurostat, Broker reports, Agoria, Gartner, Ovum, National Institute of Statistics and BCG analysis
... can grow to 8.4% of GDP in 2020
at 12% growth per year...
8.4%
Internet
Economy 37.3
21.4 Exports
19.0 Imports
Government
Spending 2.7
Investment 5.4
Consumption 26.9
the opportunity
Euro Bn
14%
1%
0%
13%
9%
12%
'14-'20
CAGR
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 14
Important local opportunity for e-commerce ...
0
5
10
15
20
25
30
14.2
5.7
14.2
19.9
2014 updated with
average European level of
cross-border e-commerce
12.3 18.6
2014 internet economy
14.2
€ Bn +€ 7.8Bn
26.5
2014 updated with reduced
cross-border and increased
online presence and spend
Rest of internet economy
(excl. e-commerce)
E-commerce
(excl. import and export)
4.4
Share of cross-border
e-commerce 34% 15%
Average spend per
online shopper
Online shoppers as
% of population 54% 68%1
€ 1,100 €1,9001
1. Western European average Source: Ecommerce Europe, BCG analysis
15%
the opportunity
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 15
... and Digital Single Market with huge further upside
Increased GDP CAGR per frontrunner country
The
Netherlands
Sweden
Finland
Estonia
Luxemburg
Ireland
Frontrunner Growth
increase
94%
42%
96%
63%
160%
46%
Potential
GDP CAGR
4.3%
3.9%
1.8%
4.1%
7.9%
6%
GDP CAGR
'14-'20
2.2%
2.8%
0.9%
2.5%
3.1%
4.1%
Frontrunners
tot. 2.2% 80% 3.9%
2020 GDP
∆
(B EUR)
Denmark 83% 3.3% 1.8% 26.6
97.3
Belgium 106% 3.2% 1.6% 45.0
35.5
11.3
2.2
18.8
27.2
264.0
Potential for Belgium
~1.6% annual growth
~2.4% annual growth
~3.2% annual growth
2014 2016 2018 2020
400
450
350
500
300
GDP (B EUR)
+106% yoy growth,
from 1.6 to 3.2% p.a.
Business as usual
Full DSM
Full DSM & accelerated digitization
the opportunity
Source: BCG study and report on "Digitizing Europe" – June 2016
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 16
BCG assessment: Industry 4.0 with major impact
€ 225 Bn industry
output
€ 5 Bn productivity gains
by 2020
Source: BCG.perspectives: Industry 4.0, BCG analysis
the opportunity
€ 15-20 Bn add'l
revenues by 2020
Translating into €10Bn of additional
GDP by 2020
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 17
Can digital revive the Belgian economy?
a new world
1
the opportunity
the call for action
2
3
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 18
Realizing potential will require Belgium to create enabling environment
Belgium should persevere on its ambitious Digital Agenda ...
1
… in time for the DSM to expand beyond the Belgian market
2
Support VC and
investments
Establish
eGovernment &
Infrastructure
Harmonize taxes
and policy
support
Develop talent
and education
Build demand,
transparency
and trust
The Digital Single Market will open up international
ecommerce opportunities ...
Provided that we can counter the import/export balance
the call for action
20160525 - Belgian Internet Economy - F Deforche - BRU.pptx 19
Threat or opportunity? Yes we can
the call for action
Offline to online retail: local or import?
Retail and logistics employment
Export revenues
Delocalisation due to labor arbitrage and productivity issue?
Manufacturing employment, Industry 4.0 products/services
Productivity gains translated in export revenues
New business models in FI
Local bank revenues and employment
Digital bank
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